Background Look at Standard Pacific Corp's credit agreement with JP Morgan and some other lenders. Item 1.01 on page 2 provides this overview. Incidentally, by "page 2,' I am using the numbers at the bottom of each page. Borrowings under the Facility are unsecured but will be governed by, among other things, a borrowing base. In addition to customary representations and warranties, the Facility also contains financial and other covenants, including a minimum tangible net worth requirement of $525 million (which amount is subject to increase over time based on subsequent earnings and proceeds from equity offerings), a net homebuilding leverage covenant that prohibits the leverage ratio (as defined therein) from initially exceeding 2.50 to 1.00 (decreasing to 2.25 to 1.00 for the March 31, 2014 measurement period and Cereafter) and a land covenant which limits land not under development to an amount not to exceed tangible net worth The Company is also required to maintain an interest coverage ratio (EBITDA to interest expense, as defined therein) of initially at least 1.60 to 1.00 (increasing to 1.25 to 1.00 for the March 31, 2014 measurement period and thereafter): provided, however, if the Company fails to meet the interest coverage ratio, it is not an event of default but rather, upon such occurrence, the Company's borrowing availability under the Facility may become more limited. The Facility also limits, mong other things, the Company's investments in joint ventures and the amount of the Company's common stock that the Company can repurchase. The lenders seem to be interested in at least three aspects of the financial statements, which presumably reflect something interesting to the lenders. The lenders do not use the same line items we see on the financial statements. Instead, they use slight transformations of the line items that add and subtract various things. In the definitions section they talk about what to add and subtract to get the figures used in the covenants. Here are some selected definitions: "Adjusted Consolidated Table Net Worth at my date, the consolidated stockholders equity of Borrower and its Subsidiaries determined in accordance with GAAP less integble assets. less minority interests in Consolidated Homebuilding Joint Ventures to the extent included in consolidated stockholders equity of Borrower and its subsidiaries, less mestres in Excluded Subsidiaries in excess of 45% of Consolidated Tangible Net Worth, all determined as of such date "Consolidated Tangible Net Worth at may date, the consolidated stockholders equity of Borrower and its Subsidiaries determined in accordance with OAR less integible assets, all determined as of such date "Levenge Ratio": the ratio, as of any date of (a) Consolidated Debt minus Unrestricted Cash in excess of the Required Cash Reserve to (b) Adjusted Consolidated Tangible Net Worth Interest Covenge Ratio" as of my date, for the applicable period the ratio of (a) Consolidated EBITDA to (b) Background Look at Standard Pacific Corp's credit agreement with JP Morgan and some other lenders. Item 1.01 on page 2 provides this overview. Incidentally, by "page 2,' I am using the numbers at the bottom of each page. Borrowings under the Facility are unsecured but will be governed by, among other things, a borrowing base. In addition to customary representations and warranties, the Facility also contains financial and other covenants, including a minimum tangible net worth requirement of $525 million (which amount is subject to increase over time based on subsequent earnings and proceeds from equity offerings), a net homebuilding leverage covenant that prohibits the leverage ratio (as defined therein) from initially exceeding 2.50 to 1.00 (decreasing to 2.25 to 1.00 for the March 31, 2014 measurement period and Cereafter) and a land covenant which limits land not under development to an amount not to exceed tangible net worth The Company is also required to maintain an interest coverage ratio (EBITDA to interest expense, as defined therein) of initially at least 1.60 to 1.00 (increasing to 1.25 to 1.00 for the March 31, 2014 measurement period and thereafter): provided, however, if the Company fails to meet the interest coverage ratio, it is not an event of default but rather, upon such occurrence, the Company's borrowing availability under the Facility may become more limited. The Facility also limits, mong other things, the Company's investments in joint ventures and the amount of the Company's common stock that the Company can repurchase. The lenders seem to be interested in at least three aspects of the financial statements, which presumably reflect something interesting to the lenders. The lenders do not use the same line items we see on the financial statements. Instead, they use slight transformations of the line items that add and subtract various things. In the definitions section they talk about what to add and subtract to get the figures used in the covenants. Here are some selected definitions: "Adjusted Consolidated Table Net Worth at my date, the consolidated stockholders equity of Borrower and its Subsidiaries determined in accordance with GAAP less integble assets. less minority interests in Consolidated Homebuilding Joint Ventures to the extent included in consolidated stockholders equity of Borrower and its subsidiaries, less mestres in Excluded Subsidiaries in excess of 45% of Consolidated Tangible Net Worth, all determined as of such date "Consolidated Tangible Net Worth at may date, the consolidated stockholders equity of Borrower and its Subsidiaries determined in accordance with OAR less integible assets, all determined as of such date "Levenge Ratio": the ratio, as of any date of (a) Consolidated Debt minus Unrestricted Cash in excess of the Required Cash Reserve to (b) Adjusted Consolidated Tangible Net Worth Interest Covenge Ratio" as of my date, for the applicable period the ratio of (a) Consolidated EBITDA to (b)
